A dividend is a distribution of cash (or occasionally, stock) to the shareholders of a company. Typically, a company begins to pay a dividend once it has grown to a state where it is established itself in the market and has more cash than is needed to fund company growth. (Explore arguments for and against company dividend policy, and learn how companies determine how much to pay out. Check out How And Why Do Companies Pay Dividends?)
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Quickly growing companies like Apple (Nasdaq:AAPL) often do not pay a dividend because shareholders would prefer for management to use the cash internally to fuel further growth. When companies grow large and can no longer find as many growth opportunities, shareholders prefer for additional cash to be returned.
While it's nice to get a quarterly check from your investments, it's important to judge each stock investment on its merits, not just its yield. An unusually high yield may signal distress or an imminent dividend cut.
On the other hand, a dividend increase from a stable or gradually growing company is often a positive sign. Not only does it show management's confidence in the firm, but it also demonstrates a commitment to returning wealth to stockholders. To get you started, here are six large dividend payers who recently increased their dividend payouts.
1. Abbott Laboratories (NYSE:ABT)
Abbott Labs hasn't missed a quarterly dividend payment in the past 87 years. Even better, the company has increased its dividend payout annually for the last 39 years. The company develops pharmaceuticals and a variety of other medical products. On February 18, Abbott announced that its new quarterly dividend would be 48 cents per share, an increase of 9%. Abbott's new yield is 3.7%.
2. ConocoPhillips (NYSE:COP)
ConocoPhillips is a U.S.-based oil company that explores for, develops, refines and markets crude oil, natural gas and related products. Conoco stock has been on the rise the past year due to increasing oil prices and an aggressive set of programs aimed at increasing shareholder value. As part of this program, Conoco increased its quarterly dividend 20% in February to 66 cents per share. This brings the new yield for Conoco to 3.7%.
3. The H.J. Heinz Company (HNZ:HNZ)
Heinz is a worldwide food company which is most famous for its ketchup, but which also has many other well-known products including TV dinners, sauces, soups, beans, pasta and baby food. In May the company announced that it would raise its quarterly dividend by 7% to 48 cents per share. This equates to an annualized yield of 3.6%. (Understanding the dates of the dividend payout process can be tricky. We clear up the confusion in Dissecting Declarations, Ex-Dividends And Record Dates.)
4. Molson Coors Brewing Company (NYSE:TAP)
Molson Coors is a major U.S. beer company which owns the brands Coors, Molson, Keystone and Blue Moon, amongst others. The company is transforming itself into a dividend stock, doubling its payout from four years ago. In May the company announced a 14% increase in its quarterly dividend to 32 cents per share. That brings Coors' new yield to 2.9%.
5. Home Depot (NYSE:HD)
Home Depot is a retailer of home improvement products and building materials with stores located in the United States, Canada, Mexico and China. The company recently raised its quarterly dividend nearly 6% to 25 cents per share. The company's new yield is 3.0%.
6. Coca-Cola (NYSE:KO)
Coca-Cola is another strong dividend stock. The company announced its 49th consecutive annual dividend increase in February. The quarterly dividend was increased to 47 cents per share, an increase of about 7%. The stock's new yield is 2.9%.
The Bottom Line
These six stocks have high dividend yields, and many have a long track record of increasing yields. This type of stability and consistent dividend growth are important factors to look for when selecting individual stocks for income. (Seven words that are music to investors' ears? "The dividend check is in the mail." See Why Dividends Matter.)